Friday, 1 February 2013

Mis-sold Swaps to cost UK banks billions

Over the past decade banks have been boosting their profits by selling Interest Rate Swap deal to SME businesses. The idea was that for a fee the business would be protected from interest rate increases on their bank loans. It is similar, but not the same as insurance. The flip side is that if the interest rate goes down the business has to pay the difference via the bank to the other party in the interest rate swap. 

Back in the 1990s there was a big fuss about IRS deal wrongly sold to Local Authorities. Much activity was focussed on unwinding the deals and paying compensation to the local authorities.  There is no way that the banks didn't know that IRS deals can be very bad news for SME organisations, but the banks gave in to greed again.

They fully deserve a big compensation bill.